VZCZCXYZ0000
RR RUEHWEB

DE RUEHCL #0224/01 3311706
ZNR UUUUU ZZH
R 261706Z NOV 08
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 8209
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHMD/AMEMBASSY MADRID 3833
RUEHFR/AMEMBASSY PARIS 0672

UNCLAS CASABLANCA 000224 
 
SIPDIS 
 
STATE FOR NEA/MAG 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINT MO PGOV
SUBJECT: SCANDAL AT THE CASABLANCA STOCK EXCHANGE 
 
¶1. (SBU) Summary: The Morocco Council for the Code of Ethics 
in Securities Markets, (CDVM) moved decisively the week of 
17 November to address a simmering scandal at the Casablanca 
Stock Exchange (CSE), recommending to the Minister of Finance 
that the Exchange,s entire leadership be dismissed for its 
"blatant failure to monitor the unlawful distribution of 
insider information."  The charges stem from the fact that 
the Exchange,s new electronic trading system erroneously 
made available to brokers confidential information on pending 
trades.  The CDVM report, however, exonerated the brokerages 
that received the information, and also concluded that the 
scandal played no role in the Exchange,s heavy financial 
losses in mid-September.  Two of the three executives singled 
out by the Council did not wait for Finance Minister 
Mezouar's decision, and have already resigned.  Named to head 
the exchange on an interim basis is respected veteran Jawad 
Namri.  End Summary. 
 
---------------- 
The V-900 Affair 
---------------- 
 
¶2. (SBU) At the center of the scandal is Bourse Maroc, a 
Moroccan financial analysis firm that disseminates market 
information to local and international brokerages and 
financial services firms.  As a result of an apparent 
computer glitch on CSE,s V-900 electronic trading system, 
the information it transmitted since March included 
confidential details of pending trades.  Clients who received 
the Bourse Maroc data stream thus knew in advance who was 
going to buy and sell stocks, in what quantities, and at what 
price. According to CDVM, Bourse Maroc used this confidential 
information to recruit hundreds of clients with promises of 
substantial financial gains. Ironically, Bourse Maroc was 
recently cited by a leading economic journal as an example of 
how far the Moroccan financial market has come with respect 
to its maturity. 
 
¶4. (SBU) The President of CSE claims not to have been aware 
of this supposed computer glitch, until informed by the 
Professional Association of Brokerage Firms on 17 September. 
The Exchange then attempted to quietly resolve the problem, 
but information about it swiftly leaked throughout the 
Casablanca and Rabat financial communities, prompting an 
outcry that led to the CDVM investigation. 
 
¶5. (SBU) In its report, the full text of which has not yet 
been released to the public, CDVM cleared the brokerage 
recipients of accusations that they used this data to 
manipulate the Exchange, and also concluded that the data 
flow was not at the root of the Exchange,s mid-September 
financial losses.  The Council judged, however, that stiff 
sanctions against Exchange administrators were appropriate, 
given their lack of oversight of the new trading system and 
their attempt in late September to quietly clean it up.  As a 
result, it demanded the dismissal of the Exchange,s top 
three executives: two did not wait on the Minister of 
Finance,s disposition of the recommendation, but instead 
resigned immediately.  The fate of the Exchange's third 
ranking official, Director General Hynd Bouhia, remains 
uncertain. A well placed contact at the Exchange told us that 
Bouhia, who is pregnant, had taken an early maternity leave 
and is unlikley to return. (Note: Bouhia was recently named 
the 29th most powerful woman in the world by Forbes Magazine. 
End Note) 
 
---------------- 
Hail to the CDVM 
---------------- 
 
¶5. (SBU) Many in the financial community have welcomed CDVM's 
actions as a "breath of fresh air". This is the first time 
that CDVM has reacted quickly and authoritatively, a seasoned 
foreign observer of the market noted.  This view is not 
unanimous, however.  Some in the press have questioned 
CDVM,s decision to clear the brokerages that received the 
information, and pointed to a possible conflict of interest 
between one of those companies, CFG Securities, and the CDVM 
itself. 
 
¶6. (SBU) Comment: This is likely only the first chapter of 
the Casablanca Exchange Scandal, and further details will 
undoubtedly emerge in coming weeks and months.  For now, the 
incident demonstrates the increasing aggressiveness of CDVM 
in policing the Exchange, and implementing tough sanctions 
against those it concludes have misused or neglected their 
power.  That the hitherto &toothless8 tiger has been able 
to do this reflects the support Minister of Finance Mezouar 
has extended to it.  Whether the penalties were &too 
harsh,8 as the President of the Moroccan Federation of 
Business told the Consul General in a recent meeting, or too 
limited, as some in the press have maintained, the CDVM is 
making its presence felt.  This will in the long run be 
positive for the Exchange,s credibility, which has suffered 
serious damage in this latest episode. 
MILLARD